Craigslist Costs Local Newspapers $5 Billion In Lost Ad Revs
- by Erik Sass @eriksass1, August 13, 2013
By offering buyers and sellers a free alternative to paid listings in newspapers, online classifieds site Craigslist saved users about $5 billion from 2000-2007, while costing local
newspapers the same amount in lost classified advertising revenues, according to a new study by professors at the NYU Stern School of Business and Harvard Business School.
The study, titled “Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers,” explored the
impact of Craigslist by analyzing newspaper publisher results over time, focusing on their degree of reliance on classifieds and the timing of Craigslist entry in their market, among other factors.
Newspapers that were more reliant on classified revenues saw a bigger drop-off after Craiglist entered their markets.
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Overall, local newspapers that relied heavily on classifieds suffered an average 20.7% drop in classified advertising rates after the entry of Craigslist in their markets. Moreover, the migration of their classifieds business to Craigslist evidently had secondary impacts on local newspapers, as it was correlated with increasing subscription prices, which rose an average 3.3%; decreasing circulation, which fell an average 4.4%; and decreasing display ad rates, which fell an average 3.1%
In terms of the chain of causation, diminishing demand for classifieds may also have diminished the incentive for consumers to buy single copies or
subscribe to newspapers, since they no longer required their listings.
At the same time, price increases intended to offset losses in classified revenues further depressed subs. This
trend, in turn, put downward pressure on display advertising rates.
In another secondary effect, newspapers that were heavily reliant on classifieds were also more likely to attempt to differentiate their content from competing newspapers, presumably in an effort to reinvent their value proposition to readers in the absence of classifieds. They were also less likely to make their content available for free online -- perhaps as part of a strategy to drive readers to the print edition and thus prop up print display ad rates.
The authors note that these results are still
relevant today -- and not just to newspaper publishers -- as “the boundaries between media industries are blurred and advertisers are able to reach relevant consumers through a variety of
platforms, such as TV, the Internet and mobile devices.”
"Newspaper classifieds" photo from
Shutterstock.
What makes matters worse is that most newspaper people that I spoke to were in a state of denial about this freight train that was bearing down on them. Newspapers have been slow ...if not stagnant to become agressive in leveraging their brand on the new digital landscape. ASK any newspaper how email subscriber/single copy reader email addresses they have...Most have slim or none. As the digital media players pick off the each and every revenue stream the reaction by newspapers has been virtually nonexistent. New thinking and leadership is required. It hasn't happened
Too bad that few publishers believed in the threat of third-party players in the classifieds space back in the late 90s. Maybe the industry response could have been different (i.e., viable).
@Al Let's see what Amazon's Jeff Bezos does with the post. Surely he will leverage the Internet.
If Bezos doesn't...who will ? Step 1 is to build the most robust email DB he can for WP. Step 2 start cranking out a series of digitally published "extensions" coming from the WP brand...I can think of 10 new digital titles that would work. He needs to engage the audience within the DC metro and those interested in the beltway with new, exciting & innovative products...kinda like knowing what consumers are looking for on Amazon shelves and then stocking accordingly. If you build the audience and engage them with relevant information...the advertisers will return.
Problem is that there also wasn't a viable alternative. Online revenue for newspaper content is hugely smaller and supports the merest skeleton staff in all but the most extreme cases and largest markets.
The opportunity is to build a series of digital products and publications for tablet and mobile that extend and redefine the newspaper's brand in the market place. There are a BUNCH of ideas that would be operationally efficient and highly profitable to these franchises. The alternative to NOT pursuing this type of strategy is the demise of the print newspaper business. You can only continue to lose money for so long before you get tired and go away...Time to get transformative thinking into these places..I have lots of ideas that would make money and keep these franchises alive. Stay tuned.
I thoroughly understand, Al. And it's all very, very difficult challenge. The online resources that seem to be doing best are aggregators rather than reporters. That makes me sad. But when ya gotta change the business model - it does have to change. :-)
We all need to mourn the old business model...think fondly about when things were different..BUT...then move on ! The alternative here is either to change and embrace the new reality...however difficult it is...and build the new model...Whatever doesn't kill you...makes you stronger.
The old order from top officials through lower management were waiting for their golden parachutes to allow the newspapers to move forward. I painfully watched up close and personal. Now many of the managers are of an age without any other place to go rather than where they are and too old to be hired for positions for which they have little to no training. (There have been many faux changes.)
If they are waiting for "golden" parachutes...they might be waiting for a VERY long time. Actual "age" really has nothing to do with it...These folks were "old" in their thinking and reticent to change long before more candles got added to their cakes...It's a lesson for all of us in this new world...You need to embrace the new..and be innovative about recreating yourself and business models moving forward or you will perish...No more gold watches to be handed out.